It was not long after acquiring North Fork Bancorp. in 2006 that Capital One Financial Corp. faced questions about when it might seek to strike yet another deal.
The rationale — which Capital One executives rejected — was that it would want to connect its Northeast branch cluster with the Southeast cluster it obtained by acquiring Hibernia Corp. in 2005. Since then, Capital One has consistently talked down the idea of another bank deal.
But industry conditions have changed considerably this year, and so has the company's tone on the topic.
Acquisitions of banks or deposits would boost a "very strong balance sheet," Gary Perlin, Capital One's chief financial officer, said in an interview Thursday, days after it raised $750 million of capital in a stock offering. "We feel that there will be enough dislocations and a realignment of the landscape."
Mr. Perlin said his $151 billion-asset McLean, Va., company could look for opportunities to acquire banks, deposits, or, to a lesser extent, loan portfolios in its current markets, such as Louisiana, Texas, and New York, as well as in adjacent markets.
The preference would be to buy smaller institutions, he said, but Capital One could look at a regional bank if "external circumstances present us with unusual and short-lived opportunities." Other possibilities include the acquisition of loan portfolios from de-leveraging companies, though Mr. Perlin downplayed that outcome.
Several banking companies have shown an increased appetite for acquisitions as others have stumbled or faced seizure. JPMorgan Chase & Co.'s acquisition of Washington Mutual Inc.'s banking operations and Citigroup Inc.'s assisted deal for Wachovia Corp.'s banking business are the most recent. Either transaction would have been out of reach for Capital One.
It stands out because its management team had said it was satisfied with its unusual branch network.
Richard Fairbank, Capital One's chairman, president, and chief executive, said in an American Banker interview in September of last year that banking acquisitions were not a strategic imperative, and that he saw no "need to connect the North and the South."
Executives have supported that view in subsequent interviews.
Analysts said now would be a logical time for Capital One to revisit the issue, given the upheaval in the banking industry and the bigger role deposits are playing in funding and liquidity. Its deposit base at June 30 was 0.3% smaller than it was on March 31, 2007, when it added North Fork's balance sheet to its local banking operation.
Richard Shane, an analyst at Jefferies & Co., cited another possible factor in an interview Thursday — the roughly $6.4 billion of securitizations and corporate debt that will come due next year. "It makes sense to replace those with deposits," he said. Acquisitions would be a logical way to do that, "because it would be very difficult and expensive to generate that organically."
Mr. Perlin said Capital One has more than $30 billion of liquidity, or enough to last through most of next year, even if conditions worsen. In addition to making Capital One the nation's ninth-largest depository institution, he said, the disappearance of Wamu and Wachovia, which had been aggressive in deposit pricing, could provide more opportunities to bring in deposits without having to raise rates.
Analysts said a point of debate involves how many opportunities to buy failed banks regulators might steer toward Capital One, given that its assets remain heavily concentrated in consumer businesses, such as credit cards and auto lending. However, the company has shown it has a resilient balance sheet, and its stock offering, which closed Tuesday, should give regulators more confidence, they said.
"For all of the criticism they received, particularly after the North Fork acquisition and all the industry turbulence of the last six months, there have been no strong concerns about funding at Capital One," Mr. Shane said. "Frankly, they don't get enough credit for that."
Analyst skepticism about the North Fork purchase covered everything from the price to the mortgage exposure it inherited from GreenPoint Mortgage Funding Inc. Capital One jettisoned GreenPoint late last year.
On Thursday, Mr. Perlin said that if his company did not acquire deposits in an acquisition, it could buy brokered certificates of deposit. But he also said it is not that interested in ramping up that activity. Capital One plans to keep its holdings steady at around $16.4 billion, he said.
Mr. Perlin also gave more details on how Capital One drummed up support to sell 15 million shares of its stock over the past week. After announcing plans for the offering, he and Mr. Fairbank spoke with more than a dozen investors in person and held conference calls with "scores" of other shareholders."We reminded people that we are above our capital target, and that adding a dollop of capital should be viewed as an expression of our strength," Mr. Perlin said.
